Bloomberg Audio Studios, Podcasts, radio News. Good morning, and good morning to all of our listeners and viewers on Bloomberg Radio and television worldwide. We are at Amelia Island in Florida for the Financial Markets Conference of the Atlanta FED, and the host has graciously agreed to join us this early morning.
Thank you for being with us.
I'm not going to ask you when you're going to cut rates, because nothing's probably changed in your view that it's not time yet. You need more confidence, and you've been the one saying maybe one later this year.
That's the same, right, nothing.
Has changed with first of all, good morning, it's good to see you, and welcome to the conference. It's good to have you here.
What you said is exactly right.
The numbers have come in for the first part of this year very bumpy, and it really suggests that inflation is going to come down far slower than I think many had expected. And so rather than focus on numbers of cuts and all that kind of stuff, really the issue right now is when are we going to be certain that inflation is clearly on.
Its path of two percent.
I think it's going to take a while before we'll know that.
For sure, Well, what is it that tells you that maybe you'll only get one or you might get no cuts this year?
What do you see in the economy?
Well, you know, we do a lot of talking to business leaders, and what they're all telling us is things are slowing down, but they're slowing down very slowly on coming off of pretty high record levels of profits and revenue. So in that instance, there's going to be continued momentum in the economy, and that momentum is just going.
To take a while to play through.
The other thing everyone tells us, though, is that pricing power is weakening. They do know that the expansion in large growth is not in their outlooks and on the table, And so for me, that says, yeah, it's going to slow down. It's going to get there, but it's only going to be eventual.
Is it likely that inflation does go down or that it could go up.
Again, Well, as you know, anything can happen. My outlook is really that inflation we'll continue to fall through this year and into twenty twenty five. I think that it will take quite a while for us to get all the way to two percent, but I do think we'll get there. But of course, the unexpected can always happen, and we've seen that through the last three or four years, where the pandemic was not expected. A war in Europe wasn't expected, and they do send ripples for the entire economy.
If that happens, we'll just have to be ready and then respond as appropriate.
One of the themes of this conference is sort of what happens next?
So what happens next?
You're higher for longer now, and some think you're going to be higher forever, that we're not going back to low interest rates.
Well, I don't think we're going to go Well, let me say this, I hope we don't go back to zero interest rates, because that means something will have happened that requires us to go to maximum support for the economy, and that would not be ideal for anybody.
I do think.
That our new steady state is likely to be higher than what people have known over the last decade, maybe back to where we were in the nineteen nineties and two thousands.
But we'll just have to see.
But I do think a strong important message people should have is going back to zero means that something bad happened in the economy and we want to avoid that as much as possible.
Well, what do you say to people who want to move or people who want to buy a new car? Hold on, wait or how long do these industries have that they can hold out until you decide what you're going to do next.
Well, I don't think anyone's waiting for us at disappointment. On the business side, you see in the auto space that producers and auto dealers they're adding incentives for people to buy their cars. We talked to lots of major sellers of cars. They're trying to move volume, they are trying to do those things. And I think for consumers it's really shop around, back to where we used to be and how the economy used to work. You got to go find where there are opportunities. They're out there,
but people just need to live their lives. And what I'm finding and seeing is most of them are doing that. The housing and home ownership, that's a special case and people are locked into those. But even there, because we have remote work and we have people work in these hybrid situations, there are opportunities for people to continue to stay engaged in the economy.
Well, a lot of people look at the housing industry, for example, and other areas that have started to slow down. And there's an argument that maybe you're going to be behind the curve in cutting rates.
I don't think that that's really the right way to think about it. For me, our mandate is stable prices and maximum employment. On the employment side, we're still seeing many many jobs being created. On the inflation side, and the stable prices, we've still got a ways to go.
And so for us and I think our given our mandates, we need to get that stable price pricing aside to where we need it to be, because at that point then the economy will be positioned to stand on its own, to move forward and to create a growth and prosperity.
When you get asked when you're going to cut rates and you give the answer that you give, and your colleagues get asked and give the answer that they give, you've said as a group that we're not doing forward guidance anymore. But is this a forward guidance that you're doing any way, because it does seem like you're guiding the markets, or at least the markets are reacting to everything you say.
Well, I think the markets have always reacted to everything we say, so, I don't think this is new. What I would say, though, is we are open to all possibilities and from here moving forward, there are scenarios where the economy is going to expand and accelerate, their scenarios where the economy might slow down faster than expected. And then there is my outlook scenario is slow in city wins the race.
In all of those.
Cases, there are policy prescriptions and we have to be ready for all of them. So in this sense, unlike in the pandemic or even the Great Financial Crisis, when we knew that most of the risk was on one side, now the risks are really balance, and so there isn't sort of a bias in one direction or another. I think that's the message to be taken. If you want to call that for a guidance, that's fine. I mean
to me, I think in many regards that's life. Like life is you don't know something good that could happen, something bad could happen, and you just have to be ready for it.
Well, you've got another month essentially before you have your next meeting, and you have to put.
Out your forecasts.
But it was a sneak preview of what you think growth and inflation are going to be like for the rest of the year.
Well, I've been told many times don't scoop yourself, so I don't know. The way our process works is as we get closer to the meeting, I meet with my team, we really try to get a sense of where everybody is on this. You know, I have a bunch of great accounts in our building who have their own views and opinions about how the economy is going to move forward. I take that on board and we'll get to a
narrative at that point. But right now, I'm just worried about this conference, making sure it goes off as well as it can, and I'm really looking forward to.
You're going to be one just one dot by yourself on the dot pot when it comes out.
Well, we'll see about that.
When you look at the economy overall, does it surprise you still that we're seeing the strength and the labor markets that we are seeing. Are you hearing anything from CEOs about that turning?
So what I've heard from from business leaders really is that today labor markets are weaker than they were, softer than they were twelve months ago, but they're not soft. You know, this is the question that we ask all the time because we need to know how the labor side of input to production is doing. But I think it's really important when we think about workers and the labor labor market is that before the pandemic, labor markets
were tight. So I don't think we're likely to evolve to a place where you know, labor is going to be there's be many many people out there available for work. We're going to go back to where we were. I will say, you know, there's been lots of reporters showed immigration has been important and important contributor, and you know, we'll see how it evolves moving forward.
Well, the big question that a lot of people Wall Street and I guess in a way Main Street are asking, is is monetary policy restrictive now? And is what you're restricting the problems in the for inflation or is it maybe stuff you can't do anything about.
Well, I think that our stance is restrictive.
Another thing we do.
We have surveys and I ask people all the time, do you think that our policy stances preventing some things from happening that you would do otherwise?
Every business leader says yes.
Now, some of them say, it's changed my forecast over the next twelve months. There I have some cash so I can actually buy some things and don't need to use debt instruments for that. But everyone acknowledges to me that our policy rate is slowing things down, it is tightening, and that's what really gives me the confidence that we can get inflation back to our two percent target.
Well, last question, we're obviously in a season where everybody's getting asked their feelings about the economy. Do you think we see any significant changes in the economy over the next six months?
Say it's hard to say.
You know, my outlook is the economy is going to continue to be growing, Inflation is going to continue to come down slowly, the economy will continue to create jobs, and the United States economy will continue to be the leading economy in the world.
Will people feel that, Uh, You'll have.
To ask them. So. I think one of the things I've heard is we don't have just one economy today. We have people that are on the lower end of the income and wealth distribution. They have spent gone through their excess savings. They are feeling somewhat where they were the same way as they were before the pandemic. Then you have a lot of other folks who accrued a lot of savings through the pandemic because they couldn't go
on vacations, they couldn't go to restaurants. They're still in a spend mode, and so a lot of what I'm trying to do today is figure out how that all fits together to give a picture of how the aggregate economy is going to move forward today. What I'm hearing is that there's still enough spend on that upper end that the economy can continue to grow, but it is slowing down.
Well, we will check in with you in a couple of months and see if anything's changed.
Rafael Bostic, thank you very much for joining us. Probably the Atlanta Fed